The full entry of China and India into the world economy doesn’t just mean billions more consumers aspiring to Western lifestyles. It also means that the world can benefit from billions of innovating brains. It’s a moment to broaden horizons, expect much more, and expand every kind of ambition.

First, though, Britain and the West need to recover a sense of what innovation is and just how much it can do.

Defining innovation and its potential

Innovation cannot be reduced to technology: while it embraces improvements both in process and in product or service, these often accompany changes in organisation. [1] However today technological innovation is weak in private services, weaker still in public services, and takes second place to changes in business model – different ways of taking money from customers. In particular, business expenditure on research and development (R&D), taken as a fraction of GDP, has been stagnant in America and Europe for 15 years or more. [2] In that faltering context, where the Organization for Economic Cooperation and Development talks up what it calls ‘the central importance of non technological innovation’, [3] it’s essential to uphold the powerful improvements, above all in productivity, that new techniques can bring.

When Adam Smith published The wealth of nations in 1776, he didn’t know that the title to his famous passage, ‘The division of labour in pin manufacturing (and the great increase in the quantity of work that results)’ would be on the back of every £20 note. Nor could he have realised how much bigger, with China and India, is the stock of ingenuity that mankind can now mobilise. [4] Yet today all corners of the Earth can rightly hope to move on toward a global division of labour far in advance of what we can imagine. By itself, that won’t lead to more time for leisure or more equality. But with more than one billion people going hungry for the first time in 40 years,[5] the need for productivity step-changes just in agriculture, irrigation and food distribution has seldom been greater.

In innovation there can be no skipping over the need for professional expertise. Still, with the opening up of Asia, more people can now specialise more deeply in particular lines of work – something that will also allow multidisciplinary initiatives in innovation to be more successful. The Internet and machine translation make international collaboration easier. So, after all today’s ignorance about the whereabouts of toxic assets, the world now has a chance finally to move toward the much vaunted, prematurely announced ‘knowledge economy’.

Scale is beautiful

Of course, Britain will not make digital cameras any time soon. Conversely, China will not forever build coal-fired power stations unequipped with carbon capture and storage. But between the nations of the world there is now an opening to share profound insights, agree on vaulting objectives, and take wealth to a qualitatively higher level: to provide more growth, and a better kind of growth.

The first principle of a new, innovatory global division of labour for the 21st century is that scale is beautiful, not smallness. In mobile telephony and electronics, miniaturisation has its place; but to lower the cost of handsets enough for world’s poor to be able to afford them, still larger, more automated production lines are needed. To make the most of sources of renewable energy, which are very diffuse, demands scale undertakings, not David Cameron’s kind of roof-mounted home windmill. Even without attacking the world’s deteriorated and substandard housing, UN estimates suggest, the world must build no fewer than 4000 houses an hour – if its increasing population is to be housed and its slums replaced. [6] More than a third of a century after Ernst Schumacher’s Small is beautiful (1973), it’s time to wave goodbye to humility, parochialism, and the dogma of ‘act local’.

Innovation must set its sights high, and can never do things by halves.

Innovation is, at its best, Big Potatoes.

[1] In the classic account of the Austrian economist Joseph Schumpeter, ‘long-term improvements in output and cheapness’ came from new technologies and methods of production or transport, but also from new consumer goods, new markets, new sources of supply and new forms of organisation. See Joseph Schumpeter, Capitalism, Socialism and Democracy (1942), Unwin Paperbacks, 1987.

[4] On top of the populous East, a mere billion people in the West now have, in their leisure time and their widespread access to the Web, an opportunity to volunteer to collaborate on innovation for between two and six billion hours a day. See Yochai Benkler, The Wealth of Networks: How Social Production Transforms Markets and Freedom, Yale University Press, 2006, p55.